Firm Analysis: Hyundai Motor America

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As U.S. automobile firms rebuild their brand image, distribution networks and workforce from the massive government-sponsored corporate restructuring in recent years, and Japanese firms continue to struggle with under-capacity due to the Tohoku earthquake and tsunami, Korean-based firms have flourished (Ramsey & Takahashi, 2011). In particular, Hyundai has experienced rapid market growth in the U.S. market due in part to the recent struggles of its main competitors. Their success, however, is also due to its new product designs, fuel efficiency, improved customer service and consumer advertising focused on total brand quality. Indeed, Hyundai’s recent success can be attributed to its increase in quality. According to a Fall 2011 study, Hyundai has improved its perceived quality amongst U.S. consumers, moving from the 18th to the 9th ranking in under three years (Transportation Business Journal). Furthermore, as defined in Exhibit 1, their mission statement lists safety, quality and efficiency as their primary undertaking in the manufacturing process.

Hyundai’s scope of operations in the automobile industry encompasses the sub-compact, compact, sedan, and SUV product lines. As outlined in Exhibit 2, Hyundai offers both base and luxury models in each product line that is comparable to its competition. As part of its U.S. operations, Hyundai currently has four main facilities: California Design and Research Center, Michigan Engineering Facility, California Proving Grounds, and the Alabama Manufacturing Facility (Hyundai USA Corporate Website, 2011). As its largest investment, the Alabama Manufacturing Facility opened in 2006 at a cost of one billion dollars, employs approximately 3,000 employees and produces over 300,000 vehicles per year at full capacity (Self, Self, & Bell-Haynes, 2011). The manufacturing plant assembles the Santa Fe, Genesis, and Sonata models while all other models are manufactured abroad and shipped to U.S. dealerships (Hyundai USA Corporate Website, 2011).

Hyundai’s devotion to quality improvement, customer perception and value, and a U.S. manufacturing presence has been rewarded with increased sales and share of the U.S. market. As displayed in Exhibit 3 and 3a, Hyundai is expected to surpass 600,000 in total sales in the U.S. market for the first time in 2011. This is due to a unit sales increase during each month in 2011 with a combined increase of 18.2% over 2010 sales numbers (Kranz, 2011). Additionally, according to an Asia News Monitor article, two Hyundai car models, the Sonata and the Elantra, will rank in the top-ten in U.S. sales if sales forecasts remain stable over the last two months of the year (Sep 2011). Indicative of further market penetration and an increase in consumer value, Hyundai has even outsold Lexus in the U.S. luxury car market; outselling Lexus in both June and July (Asia News Monitor, Aug 2011). Finally, Hyundai’s overall market share reached an all-time high of 5.1% in June 2011 continuing the upward trend shown in Exhibit 4, with a higher total market share then Toyota when trucks are excluded from the calculations (Asia Pulse, 2011).

As displayed in Exhibit 5, aside from total revenues, gross profit and cash holdings, Hyundai’s key financial ratios rival their U.S. competition. Of key note, Hyundai’s operating margin and return on assets are significantly better than industry averages. Both percentages display the effectiveness of Hyundai’s management in their devotion to quality management throughout the manufacturing process as they strive to decrease defects while increasing total production levels (Ihlwan, Armstrong & Eidam, 2004). Overall, Hyundai is well positioned amongst its key competitors as defined by financial ratios. Competitive Position:

Over its history in the U.S. market, Hyundai has survived as a cost leader in a limited market. Specializing in compact cars and sedans, Hyundai entered the U.S. market in 1986 selling only a sub-compact car, the...
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